Registered: Mar 2011
02-06-12 03:47 PM
Its simple , a few more years of trading and u'll understand.
1) The prices have an appeal factor. Trying buy/sell a stk that's $9000 vs a stock thats $15.
2) Option pricing. The smaller or bigger the prices, the impact on the options markets (which generates alot of volume, hence the term derivatives). Similar the MM and IB will want it at a range suitable for all types of market players and generate lots of volume.
3) Rules of shorting and etc. A high price means it may be harder to borrow due to 1. and 2. And therefore we see the same thing, shorters being force to return on market open, risky stuff etc.
4) Fees based on no. of Shares, affected by share price. To hedge a $50,000 value of 3x finance, I may need to have 5000 shares of $10, vs 500 shares of $100. The cost of 5000 shares is much much more than 500, and that slippages and risk will kick in.